Warren Buffett’s Berkshire Hathaway Posts First Quarter Earnings Drop

Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B), the conglomerate controlled by billionaire investor Warren Buffett reported an earnings decline for the first quarter of 2014.

Buffett’s conglomerate and its subsidiaries generated $4.71 billion net earnings or $2,862 per class A shares , down 3.8% from $4.89 billion or $2,977 per class A shares in the same period a year ago.

The conglomerate said its operating earnings were $3.53 billion including $461 million from insurance-underwriting, $720 million from insurance-investment income, $1.18 billion from railroad, utilities, and energy, $1.17 billion from other businesses and $5 million others. Last year, its operating earnings were $3.78 billion.

Excluding investment and derivative gains, its operating earnings per class A equivalent shares were $2,149, lower than the $2,171 average estimates of three analysts polled by Bloomberg.

According to Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B), its book value increased 2.6% to $138,426 per class A equivalent share while its insurance float (the net liabilities estimated under insurance contract) were $78 billion  as of March 31, 2014.

Commenting on the financial results of Buffett’s conglomerate, Bill Smead, chief investment officer at Smead Capital Management told Bloomberg, “When you get a substantial portion of your earnings from insurance, you live with the fact that the numbers bump around.”

On the other hand, Reuters quoted a comment from Mark O’Hare, a private investor from Brisbane, Australia who said, “It’s the medium to long-term results that count.” He added that Berkshire Hathaway’s profit decline is “consistent with what Mr. Buffett has always said: underwriting results will vary from year-to-year. The key is that it’s a profitable underwriting result.”

Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) will held its annual shareholder meeting tomorrow at its headquarters in Omaha. Buffett is expected to highlight the achievements of its portfolio managers Ted Weschler and Todd Combs tomorrow. The conglomerate’s vice chairman o Charlie Munger is expected to answer questions from analysts, journalists, and shareholders.

The  class A shares of Berkshire Hathaway Inc. (NYSE:BRK.A) dropped 0.63% or $1,128 to $192,255 per share while its class B shares (NYSE:BRK.B)  fell 0.75% or $0.97 to $128.09 per share on Friday.